The Office of the Comptroller of the Currency (OCC) issued an interpretive letter this week regarding the ability of national banks and federal savings associations to utilize stablecoins.
The OCC concludes that a national bank or federal savings association may validate, store, and record payments transactions by serving as a node on an independent node verification network (INVN). These financial institutions may use related stablecoins to carry out activities like payments. In deploying these technologies, a bank must comply with applicable law and safe, sound, and fair banking practices. The OCC says that by engaging in these services, the federal banking system may improve while offering real time payments.
Attorney Jeffrey Alberts, Partner and co-chair of Pryor Cashman’s Financial Institutions Group and lead of the firms White Collar Defense & Investigations practice, says this announcement is a game-changer for stablecoins:
“The OCC’s new interpretive guidance is a game-changer both for banks and for cryptocurrency companies. First, it expands what many considered to fall within the permissible business of banking. This is likely to have implications not just for the use of cryptocurrencies but also other financial innovations. Second, it will permit U.S. banks, which have lagged behind international competitors in financial innovation, to take the lead in offering cutting-edge services to consumers. Third, it will permit cryptocurrency companies to take advantage of the well-developed compliance programs at regulated banks. It has proven challenging for cryptocurrency companies to build compliance programs from scratch. This guidance will allow many of these cryptocurrency companies to let banks handle compliance, much as Fintech payments companies do”
By publishing this letter, the OCC has provided a good legal foundation for banks to become more active with stablecoins, digital assets that typically represent a fiat currency like the US dollar or euro. Stablecoins may benefit from streamlined rails removing friction, and cost, that is affiliated with more traditional transfer and payments technology.